Wednesday, April 15, 2015

STATE BUSINESS CLIMATE: MARKET SAYS IT’S PRETTY GOOD

The drumbeat from Republican
politicians, governors of states like Texas and Florida and from independent
relocation consultants seems constant: California’s business climate stinks;
high taxes and heavy regulation are driving businesses and jobs out of this
state.

These folks note that companies big
and small, from Toyota and Nissan to Buck Knives, have announced they are
moving corporate offices out of California to low-tax, low-regulation, low-wage
states.

They also harp on the fact that more
Californians move to other states than residents of other states move here, a
phenomenon that’s far weaker now than at the height of the recession five years
ago.

All this, they say, adds up to a lousy
business climate, one which cries out for less regulation, lower corporate and
capital gain taxes and a laissez faire attitude toward virtually anything
business wants to do, a la Texas. In fact, the business-funded Tax Foundation
ranks this state’s tax structure the third worst for business and its
regulatory environment eighth worst.

But wait. At the same time that
California was allegedly losing jobs, unemployment declined from a peak of 12.4
percent four years ago to 6.8 percent this spring, the biggest reduction of any
state. California also produced more new jobs in that time than any other
state, by far.

In fact, reports Bloomberg News, one
major barometer of business health that is purely market driven and rarely
subject to influence peddling says California is far and away the best state
for business. Better – and bigger – than almost all countries.

That barometer is the stock
market. It turns out that while the folks Gov. Jerry Brown likes to call
“declinists” have steadily bemoaned California’s alleged plight, stock traders
moved by the profit motive and not by propaganda were saying it’s just not so.

The
63 companies in the Standard & Poors 500 index headquartered in California
produced the best returns of the five states with the largest populations.
Since the beginning of 2011, those companies produced a 134 percent return on investments,
more than doubling in book value. The closest big-state challenger to that
remarkable performance was Florida, where S&P companies had an 82 percent
return. Texas companies gave investors a mere 52 percent return on investment.
Not bad, but not nearly up to California’s performance.

The California companies posting this
performance are in fields from health care to biotech, energy to electronics.
Companies making consumer staples, including agriculture, were among the
healthiest, seeing the value of their stocks triple over the last four years,
Bloomberg said.

Their promise for the future is best,
too, because California companies spent far more than firms in other places on
research and development – betting on their futures. Of the 122 outfits in
Bloomberg’s America’s Clean Technology Index, 26 are in California, more than
20 percent. They spent an average of $118 million, or one-fourth of their
sales, on R&D, compared with an average of 9.4 percent for companies
elsewhere.

While all this was going on, California
was climbing back into seventh place among all countries, with only six nations
– one of them comprising the rest of America – boasting higher gross national
products. That means the state, ranked as high as sixth before the rise of
China, has surpassed the huge production of Brazil.

And 33 California companies are among
the 500 largest in the world. Meanwhile, of the 123 Americans among the world’s
400 richest people, 28 live in California, meaning high taxes are no deterrent
to the super rich – perhaps because many of them manage to evade most of those
levies.

And what about the fact that six
Californians leave the state for every five who move here? It turns out,
reports the real estate website Trulia, that has more to do with housing prices
than anything else.

Stock market and job growth has helped
drive California prices ever higher, with a family income of about $140,000
needed to support buying the median San Francisco Bay area home, and $89,000
needed in the Los Angeles area. With home prices exponentially lower elsewhere,
it’s no wonder some homeowners choose to cash out at the same time California’s
wealthy, newcomers and long-timers alike, keep driving prices up in many
places.

Put it all together, and things are
far from perfect, but the picture is a whole lot brighter than what’s painted
by politicians who so often try to win votes by putting California down.

-30-
Elias is author of the current book “The Burzynski
Breakthrough: The Most Promising Cancer Treatment and the Government's Campaign
to Squelch It,” now available in an updated third edition. His email address is
tdelias@aol.com

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About Me

Thomas Elias writes the syndicated California Focus column, appearing twice weekly in 88 newspapers around California, with circulation over 2.2 million.
He has won numerous awards from organizations like the National Headliners Club, the California Newspaper Publishers Association, the Los Angeles Press Club, and the California Taxpayers Association. He has been nominated three times for the Pulitzer Prize in distinguished commentary.
Elias is the author of two books, "The Burzynski Breakthrough: The Most Promising Cancer Treatment and the Government's Campaign to Squelch It" (now in its third edition; also published in Japanese and recently optioned for a television movie) and "The Simpson Trial in Black and White," co-authored with the late Dennis Schatzman.